Managed Futures ‘sort of’ Participate on Bernanke Rollercoaster

Stocks lit up like a Christmas tree following the Bernank’s announcement, resulting with a substantial risk on day yesterday. The Dow Jones ended up 1% at 15,676, the S&P also made a one percent gain on the day ending at 1,725. Gold Futures were up more than 4%, with Silver up 6%, Crude Oil up 2.5%, and with 10yr and 30yr bonds up more than 1%, and the USD down 1.3% . Today saw some small retracements in Energies, Bonds and Currencies (past performance is not necessarily indicative of future results).

Finviz Risk On Day BernankeChart Courtesy:
Disclaimer: (past performance is not necessarily indicative of future results)

Where have we seen this neon green sight before? Oh, that’s right, it was the last time Federal Reserve Chairman got up on a podium and spoke about the possibility of maybe slightly thinking about ending Quantitative Easing, but quite some time later.  Keeping in tune of being promisingly ambiguous, Bernanke announced the fed would not “taper” QE, until whenever they decide it’s the right time. By now, someone should have a Bernanke-o-meter, gauging moves in markets for each word or syllable spouted from Fed Chairman Bernanke’s mouth.

How did managed futures take the atomic green up day?  We took a look at the results for the Newedge CTA index yesterday and found a positive daily return, but unfortunately not at the +1% to +3% clip other assets rose, with the index up just +0.25% and Trend Index up +0.48%.  Why so small? Well, managed futures programs aren’t completely ‘risk on’, and likely had large winners AND losers yesterday, netting out at a slight positive (hey, we’ll take what we can get right now).  In fact, September has seen three days with a higher daily return than “the big event” yesterday,  showing once again that managed futures truly do dance to a different beat.

BernankePhoto Courtesy: Moon Battery

As for the whole Bernanke and the QE thing… Good ol’ Bernanke citied many worrisome economic factors on the horizon including tighter monetary conditions, rising mortgage rates, as well as future debates in Washington over the sequester and debt ceiling. Forbes outlines the chairman’s restrained statement on the economy.

“The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market,” read the statement, which also made references to the fact that “mortgage rates have risen further and fiscal policy is restraining economic growth.”

In the end, the committee states that there is no time table in place, as there are too many uncertain economic factors at play. However, in his speech, the chairman did say that the national unemployment rate must be below 6.5% before they will consider tapering. Some analysts say it will start next year some say 2014, and others think it won’t happen till 2016.

So about all that talk about the negative roll yield in a rising rate environment and managed futures performance in rising interest rate periods … we may have to wait a while and look for some good old fashioned grain, energy, or currency trends.


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Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.

The entries on this blog are intended to further subscribers understanding, education, and – at times- enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex, and is not intended as investment advice, or an offer or solicitation for the purchase or sale of any financial instrument. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.

*The mention of specific asset class performance (i.e. +3.2%, -4.6%) is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.), and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship and self reporting biases, and instant history.

The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on Attain’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by Attain, and averaging of various indices designed to track said asset classes.

It should be noted that past market performance is not indicative of future market movement.No market data or other information is warranted by Attain Capital Management as to completeness or accuracy, express or implied, and is subject to change without notice.

Managed Futures Disclaimer:

Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.